Hey, financial advisers: Technological choice is finally coming, so let the good times roll.
During the next few years, custodians plan to invest hundreds of millions of dollars in a full menu of attractive technology choices, all in the hopes of wooing advisers.
Thanks to the recent buzz about plans by Schwab Institutional and TD Ameritrade Institutional to revitalize some of their core offerings and roll out integrated adviser platforms, an interesting thing happened over at rival Fidelity Investments: The firm issued a press release touting the fact that 600 registered investment advisory firms now use its WealthCentral platform.
For those not familiar with the Fidelity platform, WealthCentral combines a highly customized customer relationship management application from Oracle with portfolio management using Advent Portfolio Exchange.
The product also features NaviPlan Central financial planning software (from Emerging Information Systems Inc.) and portfolio re-balancing and trading developed by Northfield Information Services Inc.
Fidelity's announcement didn't strike me as particularly newsworthy or noteworthy until I went back to my coverage of the platform's launch in April 2009 and found that just 50 firms took part in the pilot.
In a follow-up call, Edward O'Brien, a senior vice president of Fidelity Institutional Wealth Services who has shepherded the platform through development and into production, shared some interesting statistics related to the increase in the number of users:
Of the 600 firms now using the web-based WealthCentral core application (essentially an advanced and updated version of Fidelity's AdvisorChannel), more than 100 firms use the Oracle CRM system, 200 use the Advent APX, 300 use the Northfield re-balancing engine, and 100 are using the NaviPlan application.
Certainly, while there is overlap among users of the applications and while levels of satisfaction might vary, the system is well-regarded, thanks to the tight levels of integration between the components and the system's core.
A few hundred firms bring in their own applications and rely on the data import and export features of WealthCentral or the data services available from Advent, Mr. O'Brien said.
Far from being a monolithic, one-size-fits-all platform, WealthCentral allows firms to continue using their own favored applications within the system. What's more, even the major third-party component interfaces are those of the providers themselves, not Fidelity.
“We want these other providers to continue to invest in their platforms and improve them,” Mr. O'Brien said. “If we didn't [encourage such openness] our clients wouldn't get to take advantage of the R&D that those third parties are investing in.”
As an example of an outsider's innovation, Mr. O'Brien pointed to Oracle's policy of making two major CRM updates each year.
Adviser demand for greater choice is reflected in the offerings of other custodians.
Consider, for instance, the CRM-centric approach that Schwab has taken in its new Intelligent Integration platform. Rather than adopting Fidelity's single-provider approach, Schwab plans to offer advisers multiple CRM choices.
One Schwab choice sounds very similar to the Fidelity approach: A turnkey solution called Schwab OneView Office that combines a pre-packaged CRM application (yet to be determined) with the Schwab Advisor Services custody platform and portfolio management tools. Another Schwab option will be the much more unbuttoned OpenView Gateway, which should allow advisers to integrate with their choice of several third-party CRM providers.
In a recent interview, Neesha Hathi, vice president of technology solutions for Schwab Advisor Services, said that “choice and open architecture” are the core themes of the platform her company is building.
“It is going to take us a little bit longer to get from start to finish, but we think that the sort of architecture we're going to build will be the future,” said Ms. Hathi, who oversees the offerings of Schwab Performance Technologies.
She went on to remind me that much of Schwab's open-architecture model has yet to be worked out.
“For example, our service model in connection with [third-party] providers will be a little different,” Ms. Hathi said. “In some cases, those providers may already have a strong service model and want to offer their own level of support; in other cases support may end up on our plate.”
Updates to Schwab PortfolioCenter, which almost certainly will be the central portfolio management and reporting application in the new platform, should please many of its 3,000 adviser users.
“We're investing quite a lot in terms of improving PortfolioCenter and especially its reporting capabilities,” said Ms. Hathi. After a pause for comic effect, she added: “It will actually look like it's from this decade.”
Clearly though, the most ambitious platform project is taking place at TD Ameritrade Institutional, which plans to open its application programming interface to all third-party vendors that can pass the company's exhaustive security review.
“It's only been a month since we made our announcement, but we've made a lot of progress with the API, and have been getting a lot of feedback and suggestions of enhancements from the other vendors,” said Jon Patullo, the technology product management director at TD.
There are 11 vendors interested in the platform and he was quick to point out that none of them as yet is a formal partner on the platform.
“We're talking to them all, but it isn't a guarantee that they are all in,” Mr. Patullo said.
Interested vendors in the portfolio management and reporting realm are Advent Software Inc., Black Diamond Performance Reporting, Morningstar Inc. and Orion Advisors LLC .
Interested CRM providers are App-Crown LLC, CRM Software Inc. (maker of Junxure), Ebix Inc. and Redtail Technology Inc.
In the financial planning arena, EISI and PIE Technologies Inc. (maker of Money-GuidePro) are talking with TD.
Also among those working with TD is Interactive Advisory Software Inc., which builds its own suite of adviser applications all tied to a single relational database.
Suresh Kumar, Pershing LLC's chief information officer, said that he applauds and respects the development efforts of the other custodians, especially those attempting complex integration work.
“Success is really defined by adoption, though,” he said.
Pershing measures its success by the 89% conversion rate of its 100,000 users to the year-old NetX360 platform, Mr. Kumar said. Eight percent are using both the new and old platforms as they transition; just 3% remain on the legacy system.
“Having APIs that anyone can use doesn't necessarily mean you are going to have a good user experience,” Mr. Kumar said, noting that additions to the Pershing platform are largely user-driven, with full integration coming once there is enough demand.
As for upcoming developments, Mr. Kumar said that Pershing will release into beta an integration of data aggregation tools from Albridge Solutions Inc., which Pershing acquired from PNC Financial Services Group Inc. this year. The product also will have business intelligence capabilities from Pershing affiliate Coates Analytics and a variety of managed account services.
“By [the] end of the year we will release many of these capabilities as beta and get feedback from the users,” Mr. Kumar said.
He said he also is excited about Pershing's moves into the mobile world, the firm most recently having launched a NetX360 for iPad implementation.
The work of the major custodians, when looked at collectively, is a sign that the next few years will usher in a new age of adviser choice.
E-mail Davis D. Janowski at djanowski@investmentnews.com.
